(Bloomberg) -- Activist investor Starboard Value contends Box Inc. has underperformed its competitors due to a slowing growth rate and poor profitability and could be an attractive takeover target.
Starboard sees the software maker as having multiple avenues to unlock value, including accelerating growth, striking a better balance between its sales growth and profitability, or potentially even seeking a buyer.
“We believe this company is very, very attractive and could be acquired,” Starboard Chief Executive Officer Jeff Smith said Thursday at the C4K Investors Conference in Toronto.
Box’s shares rose as much as 4.5% in New York trading. They closed up 3.7% to $16.36, giving the company a market value of $2.42 billion.
Starboard disclosed a 7.5% stake in Redwood City, California-based Box last month, putting more pressure on the company, which has struggled to accelerate sales and become more profitable.
Smith said later Thursday in an interview with Bloomberg TV his preferred avenue for the company to create value wasn’t through a sale. He acknowledged several potential strategic buyers, such as Adobe Inc. or Oracle Corp., along with private equity firms, may be interested in acquiring Box.
A representative for Box declined to comment.
Box is facing problems similar to those of other companies whose organic growth has slowed while having trouble shifting their model, Smith said. Box hasn’t met lofty sales growth targets that are common in the cloud-computing market, as it tries to transition to a broader software suite from from its current data-storage products.
“The issue comes when you’re promising more growth than you’re achieving and you’re not able to pivot and balance that profitability and instead, as you may see in Box, you instead continue to spend more and more dollars chasing that growth,” Smith said. “Those companies that are reaching that level really need to also understand how to balance profitability.”
Starboard has been one of the busiest activists this year, launching 10 campaigns, according to data compiled by Bloomberg. Those targets have included Dollar Tree Inc., EBay Inc., Bristol-Myers Squibb Co. and Papa John’s International Inc., where Smith was appointed chairman in February.
(Updates with closing share price in fourth paragraph.)
--With assistance from Michael Bellusci, Erik Schatzker, Nico Grant and Josh Friedman.
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